Introduction
In the current bullish market environment, the cryptocurrency market sentiment is high, and various mainstream coins and Altcoins have experienced a surge. The price of Bitcoin ($BTC) has continuously hit new highs, the market capitalization of Solana ($SOL) has exceeded $100 billion, and even Ethereum ($ETH), which has long been questioned, has seen a promising rise. In this frenzy, Memecoins have become the focus of investors' attention, with Dogecoin ($DOGE), the representative of Memecoins, doubling in value, and various dormant Memecoins also bursting out.
The rise of Memecoins is not only a natural extension of market demand, but also an important strategic adjustment of exchanges from high-valued, low-liquidity traditional VC tokens to fully circulating, narrative-driven tokens. As more and more Memecoins are listed on centralized exchanges, the enthusiasm of retail investors has been continuously high, and the exchanges have also reaped huge traffic and fee income. However, accompanying the prosperity are the inherent high risks of Memecoins. From low survival rates to market manipulation, to the lack of technological innovation, the future of Memecoins is full of uncertainty.
This article will take the causes, process, and risks of the Memecoin craze as the entry point, analyze the background, logic, and future potential of this phenomenon, and explore how to find truly valuable projects in this frenzy.
1.Causes
1.1 The VC Token High Valuation Trap
The reason for the continuous listing of new Memecoins by exchanges can be traced back to a report released by the Binance Research Institute in May this year, titled "High Valuation, Low Initial Liquidity Tokens". The report pointed out that VC tokens launched in 2024 generally have the characteristics of "overvaluation but low initial liquidity", and also emphasized the risk of selling pressure caused by token unlocking. The report specifically mentioned the unique advantages of Memecoins: most Memecoins have achieved a fully circulating state, and the MC (market capitalization) to FDV (fully diluted valuation) ratio is 1. This means that Memecoin holders will not face the problem of value dilution due to token issuance. Although Memecoins lack practicality, these features have attracted the attention and interest of many retail investors.
(Related reading: "In-depth Analysis: Binance's Announcement on Recruiting Small and Medium-sized Market Cap Projects to List")
Source:Twitter(@Coin98Analytics ) Figure1.1
This report immediately sparked widespread market response, hinting that Binance had already noticed the potential of Memecoins and recognized their appeal to users. Subsequently, Binance co-founder He Yi published an article on the Binance Square in June, on the one hand clarifying community concerns and clearly stating that Binance did not have pricing power; on the other hand, she reflected on the industry's development history and pointed out that the ICO in 2017, the IEO in 2021, and the "shearing" strategy in 2023 may no longer be suitable for the current market environment. More thought-provoking is her implicit question: If there were no VC investment or project party involvement in the market, would it become healthier?
Source:Binance Square Figure1.2
These signals not only reveal the unique appeal of Memecoins in the current market, but also reflect the exchanges' deep insights into the market environment and investor behavior.
1.2 The User Conversion Advantage of Memecoins
For leading exchanges like Binance, there may be deeper reasons behind the listing of Memecoins. The Binance Research Institute's report on November 4th, "Understanding the Rise of Memecoins", pointed out that compared to most Altcoins supported by VCs, Memecoins are widely believed to be not only more equitable, but also provide ordinary investors with a more understandable and attractive narrative. For ordinary retail investors who are not familiar with technology, they are often able to grasp the logic behind Memecoins driven by cute images or attractive stories more quickly, while the technical complexity of Layer 2 solutions or DeFi primitives appears to have a higher threshold and is more difficult to digest. In other words, Memecoins have a significantly faster user conversion time than technology-driven Altcoins.
More importantly, this rapid conversion feature allows the narrative of Memecoins to spread to potential buyer groups at an extremely fast pace, quickly forming a community and igniting speculative enthusiasm. Compared to traditional Altcoins, Memecoins are more easily able to leverage their high propagation characteristics to drive market sentiment, which directly leads to extremely rapid market dynamics and efficient user adoption rates.
This phenomenon is also evidenced by the speed at which capital flows into emerging Memecoins. For example, $WIF grew from 0 market value to $1 billion in just 104 days, while $SHIB achieved the same goal in 279 days. Even the earliest $DOGE took 8 years to reach this milestone. Nowadays, the creation speed of new Memecoins and the pace of capital inflow are far beyond previous levels, and thanks to their simple and easy-to-understand attributes, the generation and dissemination speed of Memecoins is faster than any previous token type. As shown in Figure 1.3, more than 75% of Memecoins were created in the past year.
Source: Binance Research Figure1.3
This trend not only shows that Memecoins are reshaping market rules, but also demonstrates their unique growth momentum and appeal in the current cryptocurrency ecosystem.
1.3 The Breakthrough Effect of Memecoins
Furthermore, the potential of Memecoins in "breaking through the circle" is also very significant. Compared to traditional Altcoins, Memecoins are more capable of building communities and attracting speculative interest from users, quickly converting potential users into actual investors. For those users who want to enter the market, the trading experience on exchanges is more convenient and direct compared to on-chain operations, and this advantage has become an important lever for exchanges to attract incremental users and capital in the bull market.
2.Process
In September, Binance officially kicked off its foray into the Memecoin arena by simultaneously listing the uppercase and lowercase Memecoins Neiro, marking Binance's recognition of Memecoins and the opening of a new strategic direction in the market.
Source:Binance Announcement Figure2.1
Although the launch of Neiro and the subsequent launch of multiple Meme coins on Binance have sparked some controversy, compared to the widespread criticism it faced when it previously listed Altcoins backed by VCs, the introduction of Meme coins has clearly won Binance more understanding and support from users. According to the on-chain analysis chart by @ai_9684xtpa, Binance had already listed 18 Meme coins by 2024, covering both the spot and futures markets. The market performance of each Meme coin varies, with some doubling or even growing several times in market capitalization, such as $PNUT and $ACT. Among them, $PNUT has been hotly traded due to the "animal protection + election politics + Musk" concept, with its market capitalization exceeding $400 million after its launch; while $ACT even surged more than 2500% in less than half a day after the announcement. This phenomenon of frequently launching Meme coins indicates that Binance is actively responding to the surging market sentiment, attracting more users' attention, and enhancing the trading activity on the platform through a diversified selection of Meme coins. This strategy not only meets the market's demand for emerging cryptocurrencies, but also demonstrates the exchange's flexibility in adapting to the current competitive environment.
Source:Twitter(@ai_9684xtpa ) Figure2.2
It is worth noting that Binance co-founder He Yi stated on social media that the listing fees for ACT and PNUT were zero, further strengthening the supportive attitude of centralized exchanges represented by Binance towards Meme coins. This approach indicates that centralized exchanges represented by Binance hope to attract more popular Meme projects by reducing the listing costs, thereby maintaining the platform's activity and user stickiness, and also incentivizing more project teams and investors to participate in the Meme coin market.
Source:Twitter(@heyibinance) Figure2.3
From the launch of Neiro to the craze of ACT, Binance, through its strategic deployment of Meme coins, has not only attracted a large number of users, but also seized the development opportunities brought by the bull market. This process not only demonstrates the exchange's flexibility in responding to market changes, but also provides valuable experience for future market layout.
3.Risks
Although Meme coins have attracted a large number of investors due to their simple narratives and easy dissemination, the risks behind them should not be ignored. The following discusses the potential issues of Meme coins from three aspects: low survival rate, malicious manipulation under the PVP attribute, and lack of technological innovation and progress.
3.1 Low Survival Rate
Most Meme coins born in 2023 and 2024 are "fleeting". 97% of Meme coins have already "died", with their trading volume close to $0. Although representative Meme coins such as $DOGE and $SHIB have survived for 10 years and 4 years respectively and have successfully established a foothold in the market, overall, the survival rate of Meme coins is still extremely low. Rapid growth and speculative nature make Meme coins a high-risk, high-return asset class, but they are heavily dependent on market sentiment and have almost no fundamental valuation support. This means that investors face an extremely high risk of capital loss when participating in the Meme coin market.
Source：CoinMarketCap Figure3.1
3.2 "Conspiracy Groups" in the PVP Market
The highly speculative nature of the Meme coin market has attracted some groups trying to manipulate the market. Some so-called "conspiracy groups" profit from the exit liquidity of retail investors through carefully designed pump-and-dump schemes. These groups often mislead the market in the following ways:
1. Creating multiple new addresses to hold tokens in concentration, disguising the illusion that the tokens are widely distributed.
2. Utilizing the transparency of the blockchain to attract investors, but it is difficult to determine the actual controllers behind the token holders.
3. Compensating key opinion leaders (KOLs) to create false hype through social media, prompting retail investors to chase the trend.
These manipulative behaviors make retail investors the victims in the high-risk speculative market. Although blockchain technology brings transparency, information asymmetry is still widespread in the Meme coin market. Investors should be highly vigilant against such market behavior.
3.3 Lack of Technological Innovation and Progress
The core appeal of Meme coins lies in their narratives, rather than their technological value. Unlike DeFi or Layer 2 projects driven by technology, Meme coins rely more on sentiment and hype. Many Meme coins lack real-world application scenarios and have made almost no contributions to advancing the technological progress of the cryptocurrency industry. This phenomenon not only leads to market saturation, but also reduces the industry's ability to attract excellent developers and innovative projects.
3.4 Future Concerns
In addition to the potential exploitation of retail traders, the popularity of Meme coins may lead to inefficient allocation of resources in the cryptocurrency industry. If the industry's time, capital, and human resources are overly concentrated on Meme coins lacking innovation, technological development may stagnate. The large influx of funds into such tokens may also weaken support for projects with real technological breakthroughs and practical application scenarios within the industry.
4.Conclusion
As a narrative-driven asset class, Meme coins have sparked widespread discussion and participation in the cryptocurrency market. Leveraging their simple logic, rapid dissemination capabilities, and low investment thresholds, they have successfully attracted a large number of retail investors and become an important tool for exchanges to expand their user base. However, Meme coins also exhibit high-risk characteristics, including low survival rates, market manipulation, and a lack of technological innovation.
Nevertheless, the potential of Meme coins is still worth noting. In a reasonable market environment, they can not only bring short-term wealth effects to investors, but may also provide the cryptocurrency industry with new community-based participation models. However, investors and industry participants need to exercise caution, avoid blindly chasing the hype, and concentrate resources on truly innovative and long-term valuable projects. Only through rational investment and effective resource allocation can the entire industry achieve sustainable and healthy development.
Disclaimer: Readers are strictly required to comply with the laws and regulations of their respective jurisdictions. This article does not constitute any investment advice.
